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How can we advance without a tax increase?

There has been a lot of buzz recently in Mexico after a tax increase that has been announced for next year. The two main points I have seen criticized are:

Value Added Tax (IVA) increase from 15% to 16%
There was a great improvement regarding the original proposal by our de-facto ruler (why de-facto? Because it is still unclear whether he won the popular vote. He has about the same legitimacy as George Bush during his first term: Legal but illegitimate): In Mexico, there is a category of items regarded as fundamental, which are exempt of IVA (tasa cero). This category includes food and medicines — Of course, this category makes up the bulk of the poorer people's consumptions, so they pay much less IVA than people with higher living standards. For a very long time, there has been a push to remove this exemption. This has been fortunately clearly understood and fought against. So, the presidential initiative, as I was saying, contemplated a global 2% tax which would not be IVA, and which would be applied universally. This tax would be earmarked to be applied to social programs, and was euphemistically called Impuesto de Combate a la Pobreza (poverty combat tax). Many people applied the concept of duck typing (if it looks like a duck, walks like a duck and quacks like a duck... It is a Value Added Tax). As many analysts, I believe this tax was meant to be the foot in the doorstop, leading to point out in a couple of years that anyway nothing is IVA-exempt anymore and the world has not come to an end, and we should apply universal IVA... So, the reduction in the increase (2% → 1%) is not the most notable thing here — The notable (and good!) thing is that they didn't succeed into killing the tasa cero.
3% tax on telecommunications
Many friends have started rallying (with the IMHO least effective way of protest you can find on Earth, just by stating their adherence in their Twitter and Facebook profiles. Wow, great deal!) that the original proposal included a 4% tax on telecommunications, and it appears that 3% will be applied. They say, quite fairly, that telephone and Internet access are no longer considerable a luxury, but a need to power the society into becoming better prepared, more competitive. My friends state as a contrast the Finnish ruling broadband access as a citizen right. What they seem not to realize is that the proportion of taxes in Mexico (collected from the responsible taxpayers, which is not by far the way for the bulk of the money in this country) is close to 30%, taking into account the big taxes (IVA, ISR/IETU) and the host of smaller ones. In Finland, the percentage of taxes payed by every person –and remember that tax evasion is way lower than here!) is over 50%.
So… What is my opinion on this? What would my ideal tax scheme be?
  • Nobody likes taxes. But the country needs far more infrastructure, far wider inverstments. We need higher taxes — But we need those taxes to be collected from people with higher income. And yes, that would mean I would most probably pay more (as I do sit relatively high on the income scale — Qualified work, even if you do not seek money for the sake of it, pays much better than non-qualified work; remember the minimal wage in Mexico is around MX$50 a day - Less than US$4 or €3).
  • The increases should be applied to the income tax (ISR). It is supposed to be around 30% for income levels over MX$5000 a month, with a very slight increase after that point. Income tax is highly deductible now, and most people with high income manage to ellude most of it. Many cases have been documented of companies as small as Walmart paying less than MX$1000 a year due to several (intentional? you bet!) holes in the legislation. That is where the bulk of the extra government income should come from!
  • For a couple of years, since I registered as a taxpayer (people receiving money exclusively as salaries under a given limit don't have to declare taxes) I have decided not to hire an accountant to make the numbers look prettier, and just do the numbers myself over the platform provided by SAT/Hacienda (the tax collecting authority). Yes, that means I am paying more than what I could — But it also means I am paying what I should! And it is an expensive point of view, but I strongly invite others to do the same. If we criticize Walmart for making numbers look prettier, shouldn't each of us do the same? Shouldn't we all care to pay what we are supposed to, so that the government has enough funds to carry out its tasks?
Yes, I am painfully aware that an important portion of what gets into the government disappears due to corruption and ineptitude. Still, the only position from where I can criticize is from being clearly legal. The same point as I do with software: I cannot ask people to comply with my Free Software licensing if I use ilegally propietary software, can I? So no, I don't use any. Even legal propietary software, free-as-in-beer (i.e. Flash player). So, please think this over before you join the Lemmings into complaining about the tax increase. Yes, this is a bad moment to increase taxes. Yes, Mexico is the worst faring country in all of America in its response to the crisis; the GDP will probably fall between 8% and 10% this year and 2010 will not be much better. Yes, it would be better to increase competitivity. But, yes, we pay ridiculously low amounts of taxes — And those of us who can afford a little reduction in our expenditure should do it. And those who make gross money should just stop it. Oh, and last point, regarding the #internetnecesario Twitter hashtag: Don't be Lemmings. Internet should be recognized a basic need for a free society. But right now in our country, it completely is a luxury, even if you cannot live without it. If you are Internet-addicted as myself, you most probably will not notice the 3% increase. FFS, We will pay MX$360 instead of MX$350 a month for my Infinitum connection. Will we really notice? In Mexico, middle and upper class are Internet-enabled. Lower classes are not. Things should change, no doubt. But it is not at all comparable to an universal IVA. Things should change and universal connectivity should be a given. But right now, calling Internet a basic good... is just out of touch with reality. ### Comments [Amnesiac]() 2009-10-23 20:55:06 **Wow...** Dude... Wow :) Right before I read your post I was talking with a friend and my wife about this topic mentioning exactly some of the concerns you addressed, and then I laughed pointing them (my wife and friend) to my screen saying: "See? this guy and me think alike!". It's the first rant on the net from my mexican fellows regarding this topic that makes sense without entering in an absurd and utter non-sense in bitch-mode. Cheers! ----- [Anonymous]() 2009-10-23 14:58:19 **It's always interesting to** It's always interesting to read about other countries' issues with taxes and the economy, especially since the problems are usually very similar. For all the English speakers, "But the country needs far more infrastructure, far wider inversion." should read "...far wider investments". Also "SAT/Hacienda (the recaudatory authority)" should be "...(the tax collecting authority". ----- [Felipe]( 2009-10-22 21:15:25 **Gunnar, mi contador tampoco** Gunnar, mi contador tampoco manipula mis impuestos para pagar menos, creo que es lo justo entre otras cosas porque le debo mucho a México. ----- [garaged]() 2009-10-24 14:32:14 **pos les dire** hay un gran problema, no se si no han agarrado el patin de que aun el mercado informal paga impuestos, tanto los oficiales al comprar todo lo que tiene iva, predial, gasolina, etc, hasta los informales que pagan en mordidas, cuotas voluntarias y esas cosa que todo sindicato obliga a pagar si quieren tener derecho a vender y me podran argumentar que los sobornos y sindicatos no son impuestos, pero todos sabemos que estan totalmente institucionalizados y tanto el poder federal (ejecutivo?) como el judicial soportan y apoyan estos, asi que no estaran en la constitucion pero si estan reapaldados por 2 de los tres poderes cuando menos ( en realidad ya sabemos que es por los tres). asi que gran parte de "lo que no se recauda" en relidad si se recauda como soporte a los rodicilos sueldos de polocias etc. y de paso de ahi sale para que incluso los funcionarios que ganan muchisimo, puedan ganar aun mas exigiendo a sus subditos una tajada de lo que muerden. en fin, asi podriamos segui hablando de las bondades de nuestro sistema social ----- [garaged]( 2009-10-22 12:48:40 **the sad part is** That everybody knows that, we all know that the biggest problem is the missing contributors, the evasors, and the overwhelming corruption that rules our coutry (and most countries for the matter) ----- [gwolf]() 2009-10-22 17:24:41 **Así debe ser - aunque más a profundidad** Si todos estuviéramos obligados a pagar lo mismo, o incluso el mismo porcentaje, sería tremendamente injusto: Quien apenas tiene para vivir no debe pagar el 16% (IVA) sobre de todo lo poco que alcanza a comprar. Quien tiene ganancias millonarias debe pagar mucho más que los que tenemos un ingreso decoroso pero apenas suficiente. Por ahora, afortunadamente, el primer supuesto se mantiene. Pero falta mucho para alcanzar el segundo. ----- [gwolf]() 2009-10-22 17:27:53 **Exactly...** and what is the best way to get out of that circle? By not being one of them. I will not be a missing contributor. I will not be an evador, or even an ellusor (who legally avoids paying i.e. by funding a Teletón or by handing over their discounts as sales-related losses). The only way out is by setting an example. Me, you, and 100 million other people. Even if it is bad for our personal interests, setting a good example is good for our collective interests. Which is good for our personal interests, although long-term :) ----- [gwolf]() 2009-10-22 17:31:24 **Círculo vicioso** ¿Los europeos tienen mejores servicios porque tienen impuestos más altos, o pueden pagar impuestos más altos porque tienen mejores servicios? ¿Hacienda recauda poco y da poco al gobierno que se queda sin cómo ofrecer servicios porque mucha gente está en la informalidad, o mucha gente está en la informalidad porque los recursos que ofrece el Estado no alcanzan porque Hacienda recauda poco? Y claro, estoy de acuerdo en que este es de los peores gobiernos que ha sufrido el país — Al menos no pueden decir que ganaron democráticamente tras el golpe de estado del 2006… Sin embargo, no por eso voy a participar en un ridículo boicot. Las doctrinas neoliberales justo buscarían eso: Demostrar que el Estado siempre será incapaz de gestionar los recursos, de modo que todo lo que el Estado posea pueda quedar en las eficientísimas manos de la Iniciativa Privada. Y no, yo no me trago esa píldora. ----- [gwolf]() 2009-10-23 15:25:47 **Thanks!** Points taken, correction made. ----- [Héctor Velarde]() 2009-10-22 13:18:27 **no muy de acuerdo...** No, Gunnar, no necesitamos más impuestos; simplemente necesitamos un gobierno más eficiente y que la gente que no paga impuestos, lo empiece a hacer. Y me refiero no sólo a las grandes empresas que los evaden usando alquimia fiscal, sino a esa gran masa, que es mayoría, y que simplemente están en la economía informal porque hemos sido incapaces de hacer de este país algo viable. Los afectados por este aumento son la base cautiva de Hacienda que no pagan contadores para que les arreglen sus declaraciones anuales. No podemos comparar el nivel de impuestos de este país con el de los escandinavos, porque tampoco se comparan los servicios que ellos obtienen con ese pago, con el que nosotros obtenemos por el nuestro. Los que gobiernan este país primero minimizaron el impacto de la crisis sistémica global y ahora nos quieren convencer que la única opción es el aumento de impuestos. Todos los ingresos han caído: las remesas, el petróleo, el turismo, la inversión extranjera... pero al mismo tiempo tenemos el gobierno más ineficiente y corrupto en mucho tiempo. Este es el peor momento para aumentar impuestos, no sólo por la crisis, sino por la agitación social que la crisis ha provocado. La liquidación de Luz y Fuerza del Centro y el aumento de impuestos, pueden ser las gotas que derramen el vaso de la paciencia de los ciudadanos de este país. ----- [Lisandro Damián Nicanor Pérez Meyer]( 2009-10-23 12:20:03 **And the saddest part...** that I would *love* to have just those taxes. The IVA in Argentina is 21%.... Sigh. ----- [m77]( 2009-10-25 17:27:00 **Hay que recaudar mejor, no más** Concuerdo contigo en casi todo, pero creo que el mayor problema está en las lagunas que permiten la evasión; el aumento o creación de impuestos nos "pega" a quienes si pagamos, mientras que los evasores logran idear alguna estrategia fiscal para continuar así. ----- [Nadezhda]() 2009-10-22 14:30:43 **La bronca es que en este país** La bronca es que en este país los impuestos no son parejos, proporcionalmente a unos les toca pagar más que a otros. ----- [Pedro Galván]( 2009-10-23 08:34:49 **Concuerdo** Estoy de acuerdo con tu postura Gunnar. Creo que en lugar de descalificar debemos involucrarnos más. Involucrarnos significa pagar impuestos y exigir decisiones que traigan el mayor beneficio sustentable para todos. Por si quieres conocer mi postura específica respecto al IEPS a telco, te pido que leas Saludos. ----- [Physiocrat]() 2009-10-23 08:45:46 **Land Value Tax** Income is easily hidden, so the tax on it is easily avoided. To prevent that, taxes should be applied directly to something that can't be hidden: land. By taxing the use, and abuse, of land and other natural resources you also gain a host of other benefits. Have you heard of Henry George? Rather than write a whole screed here I'll just suggest some searching on Henry and LVT. I'd include links, but I don't want to spam, and there might be info specific to Mexico that I'm not aware of. ----- [Roadmaster]() 2009-10-26 21:40:04 **Pardon me...** Pardon my french, but fuck the government and fuck more taxes. Historically, and even more so with the current, inept and avaricious government, however much money goes into the country's revenue stream, there's NO guarantee that it'll be used to solve the country's problems; much to the contrary it'll go to waste among the country's elite, it's absurd that government high officials are among the world's highest-paid, and they want us to bankroll their lives of luxury. So no, unless FIRST a radical change comes and there's some guarantee that the money they take from me will be used to my benefit, and not to that of the ruling few, I flat out refuse and oppose any new taxes. I bet the finns are OK paying 50% of their income in taxes, because they CAN SEE RESULTS, unlike here in Mexico where all I see is Mr. Carstens getting fatter every day. ----- [sam]( 2009-10-22 22:28:16 **I guess an efficient** I guess an efficient government is out of the question then huh?